Outlaw Lab., LP v. Shenoor Enter., Inc., CIVIL ACTION NO. 3:18-CV-2299-B

• Decision Date: 04 March 2019
• Docket Number: CIVIL ACTION NO. 3:18-CV-2299-B
• Citation: 371 F.Supp.3d 355
• Parties: OUTLAW LABORATORY, LP, Plaintiff, v. SHENOOR ENTERPRISE, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

371 F.Supp.3d 355

OUTLAW LABORATORY, LP, Plaintiff,

v.SHENOOR ENTERPRISE, INC., et al., Defendants.

CIVIL ACTION NO. 3:18-CV-2299-B

United States District Court, N.D. Texas, Dallas Division.

Signed March 4, 2019

Ronald W. Burns, RWBurns & Co. PLLC, Frisco, TX, for Plaintiff.

Derek D. Rollins, Martha Hardwick Hofmeister, Timothy D. Zeiger, Shackelford, Bowen, McKinley & Norton, LLP, Dallas, TX, David Amin Jaffer, Pro Hac Vice, Mary Ellen Meyer, Pro Hac Vice, Jaffer Law, P.C., Tucker, GA, for Defendants Shenoor Enterprise Inc., Rohail Enterprises Inc., Kzak Enterprises Inc.

Hessam Parzivand, The Parzivand Law Firm PLLC, Stafford, TX, Niles S. Illich, Law Office of Niles Illich PhD JD, Addison, TX, for Defendant A & Z Irving Investments Inc.

Derek D. Rollins, Shackelford, Bowen, McKinley & Norton, LLP, Dallas, TX, Patrick C. Canon, Bhojani Law PLLC, Irving, TX, for Defendant 8th Street Petroleum Inc.

Janet K. Colaneri, Marcus C. Marsden, Jr., The Colaneri Firm PC, Arlington, TX, Bob McGrath, The Colaneri Firm PC, Dallas, TX, for Defendant Sahil Ismail Inc.

Favad Bajaria, Bajaria Law Firm PC, Dallas, TX, for Defendant M & V Enterprise Inc.

Andy Nikolopoulos, Fox Rothschild LLP, Dallas, TX, for Defendant Bansal Properties Inc.

Refai Investments Inc., Dallas, TX, pro se.

MEMORANDUM OPINION & ORDER

JANE J. BOYLE, UNITED STATES DISTRICT JUDGE

Outlaw is a manufacturer of male dietary supplements, the Tristeel Products. Outlaw has sued convenience stores because they "advertise and offer for sale" competing male dietary supplements, the Rhino Products. Outlaw alleges that these retailers have committed false advertising under the Lanham Act because they disseminate false statements through the sale of the Rhino Products; specifically, the Rhino Products are labeled "all natural" and state they contain "no harmful synthetic chemicals." Outlaw alleges that these labels are false because Rhino Products contain "dangerous undisclosed ingredients" typically found only in prescription drugs, not over-the-counter supplements. Outlaw argues these retailers are liable for false advertising because they display and sell the falsely labeled Rhino Products in their stores.

Some of the retailers have appeared and moved to dismiss Outlaw's complaint on various grounds. The Court held a hearing on these motions. At the hearing, the Court dismissed Outlaw's complaint for failing to state a claim on which relief could be granted. See Doc. 87, Order. The Court issues this Memorandum Opinion and Order, which is consistent with and elaborates on the reasoning of that ruling.

I.BACKGROUND

A. Factual Summary

This case arises out of a string of FDA announcements notifying the public that certain male dietary products, including the Rhino Products, contain hidden drug ingredients that could be dangerous. Doc. 1, Compl., ¶¶ 25, 31–32. The FDA warned that Rhino Products were tested and found to contain sildenafil

and other undisclosed chemicals. Id. ; see also Doc. 59-1, Ex. A ("FDA News Release"), 1–4. Sildenafil is the active ingredient in the prescription drug Viagra. The FDA has recognized that it is illegal to sell a drug containing sildenafil without a prescription. The Rhino Products do not disclose that they contain sildenafil, which is dangerous for some people because it can cause serious side effects. Doc. 1, Compl., ¶¶ 31–32.

Plaintiff Outlaw is a manufacturer and distributor of male dietary supplements, the Tristeel Products. Id. ¶¶ 58–59. Plaintiff alleges that it uses only all-natural ingredients in the Tristeel Products. Id. Plaintiff alleges it sells the Tristeel products through its website and at retail locations across the United States. Id. Plaintiff alleges all-natural products like the Tristeel Products are more expensive to manufacture than synthetic products are. Id.

Sometime after these FDA announcements were made, Outlaw filed this lawsuit. Doc. 1, Compl. The complaint alleges false advertising under the Lanham Act related to the sale of the Rhino Products. Id. ¶¶ 21–30. Named in the complaint are fourteen retail outlets (gas stations and convenience stores) that allegedly sell the Rhino Products. Id. ¶¶ 44–57. Outlaw generally alleges that these retailers ("Retail Defendants") did the following: Retail Defendants "are engaged in a scheme to distribute and sell" Rhino Products; Retail Defendants have "knowingly and materially participated in false and misleading marketing, advertising, dissemination and labeling to promote and sell the Rhino Products," all of which have been the subject of an FDA announcement stating they contain the hidden drugs, including sildenafil; the hidden drugs either require a prescription or are not FDA approved; the Rhino Products do not disclose that they contain these drugs; instead, the Rhino Products have labels stating they are "all natural," with "no harmful synthetic chemicals," do not require a prescription, and have limited side effects. Id. ¶¶ 21–30. Further, Outlaw alleges that Defendants "advertise and offer for sale" these Rhino products. Id. ¶ 61. Outlaw alleges that Defendants "mislabel" the Rhino Products and thus make "numerous false and misleading representations. Id. ¶ 62. Outlaw alleges "Defendants knew, or should have known, that their Rhino Products contain hidden drug ingredients," and that Defendants failed to disclose this to their customers. Id. ¶¶ 63 & 65. Outlaw alleges that these misrepresentations are material and that the goods have been introduced into interstate commerce. Id. ¶¶ 67–68. Finally, Outlaw alleges it has been injured by Defendants' false and misleading statements because it has suffered commercial and reputational damage in the sale of its competing Tristeel Products. Id. ¶ 69.

For relief, Outlaw requests preliminary and permanent injunctions, compensatory damages, disgorgement of Defendants' profits, restitution, treble damages, punitive damages, and costs and fees. Id. at 13–14.

B. Procedural Background

Outlaw filed this complaint on August 30, 2018 (Doc. 1). Outlaw brings the same false-advertising claim under the Lanham Act against all Defendants. The complaint named 14 Retail Defendants and 1–100 unnamed John Does. Here is a list of the named Defendants and their status in this case:

(1) Defendants Shenoor Enterprise, Inc., Rohail Enterprise, Inc., Kzak Enterprises, Inc., and 8th St. Petroleum Inc. have filed motions to dismiss (Docs. 56 & 64);

(2) A & Z Irving Investments, Inc. has joined another Defendant's motion to dismiss (Doc. 37) (joining Doc. 10);

(3) Sahil Ismail Inc. has filed an answer (Doc. 9) and an out-of-time motion to dismiss (Doc. 40);

(4) M & V Enterprise, Inc. has filed an answer (Doc. 7) and a motion to dismiss (Doc. 6);

(5) Bansal Properties has filed a motion to dismiss (Doc. 21);

(6) Refai Investments, Inc. has appeared pro se and filed an answer (Doc. 20);

(7) Defendants PMR Oil & Gas Company, Inc., Mola Investments Inc., and MacLaren Group Ops., LLC have settled with Outlaw and have been terminated from the case; and(8) Two Defendants, Cosectra Consortium, Inc. and Swami Management, have not appeared in the case despite being served. Outlaw has not yet moved for default judgment as to these two Defendants.

Defendants moved to dismiss the case on substantially the same grounds. Outlaw has responded to these motions to dismiss in a timely manner. On February 27, 2019, the Court held a hearing on these motions to dismiss; counsel for the parties that filed motions appeared and argued their positions. After considering the arguments, the Court dismissed Plaintiff's complaint. Doc. 87. The Court issues this Memorandum Opinion and Order, which is consistent with and elaborates on the reasoning of that ruling.

II.LEGAL STANDARD

A. Federal Rule of Civil Procedure 12(b)(1)

" ‘Federal courts are courts of limited jurisdiction.’ " MacKenzie v. Castro , No. 3:15-cv-0752-D, 2016 WL 3906084, at *2 (N.D. Tex. July 19, 2016) (quoting Stockman v. Fed. Election Comm'n , 138 F.3d 144, 151 (5th Cir. 1998) ). For that reason, they can adjudicate claims only when subject matter jurisdiction "is expressly conferred by the Constitution and federal statute. Federal Rule of Civil Procedure 12(b)(1) provides the vehicle through which" a party may challenge that jurisdiction. Armstrong v. Tygart , 886 F.Supp.2d 572, 584 (W.D. Tex. 2012) (internal citations omitted). "Standing is an issue of subject matter jurisdiction, and thus can be contested by a Rule 12(b)(1) motion to dismiss." Little v. Tex. Attorney Gen. , No. 3:14-cv-3089-D, 2015 WL 5613321, at *2 n.5 (N.D. Tex. Sept. 24, 2015) (citing Lee v. Verizon Commc'ns Inc. , 954 F.Supp.2d 486, 496 (N.D. Tex. 2013) ).

"A Rule 12(b)(1) motion can mount either a facial or factual challenge." MacKenzie , 2016 WL 3906084, at *2. A facial challenge occurs "when a party files a Rule 12(b)(1) motion without including evidence." Id. A factual challenge, by contrast, occurs when a party supports its Rule 12(b)(1) motion with evidence. Id. In both cases, the burden of proof " ‘is on the party asserting jurisdiction.’ " Id. (quoting Ramming v. United States , 281 F.3d 158, 161 (5th Cir. 2001) (per curiam) ). So Plaintiff must prove jurisdiction exists. Yet that is no high bar: " ‘[I]t is extremely difficult to dismiss a claim for lack of subject matter jurisdiction.’ " Santerre v. Agip Petrol. Co. , 45 F.Supp.2d 558, 566 (S.D. Tex. 1999) (quoting Garcia v. Copenhaver, Bell & Assocs. , 104 F.3d 1256, 1260 (11th Cir. 1997) ).

Here, Defendants filed their Rule 12(b)(1) motion without any additional evidence, so it is considered a facial attack. Thus, the Court may consider just "the allegations in the complaint because they are presumed to be true." Paterson v. Weinberger , 644 F.2d 521, 523 (5th Cir. 1981). And if they sufficiently allege a claim for recovery, then the complaint stands and the court must entertain the suit. Id.

B. Federal Rule of Civil Procedure 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) authorizes a court to...